Capital asset pricing model khan academy,woodcraft supply franklin tn,coffee tables sale melbourne - For Begninners

06.11.2013
O SlideShare utiliza cookies para otimizar a funcionalidade e o desempenho do site, assim como para apresentar publicidade mais relevante aos nossos usuarios. Slideshare uses cookies to improve functionality and performance, and to provide you with relevant advertising. Jensen’s Alpha is a risk-adjusted performance benchmark that tells you how by much the returns of an actively managed portfolio are above or below market returns. Originating in the late 1960s, Jensen’s Alpha (often abbreviated to Alpha) was developed to evaluate the skill of active fund managers in stock picking.
Careful stock picking and financial engineering means that investors can add alpha to a portfolio without adversely affecting beta. The market return is usually described by the expected return of an index fund, like the FTSE or S&P500. I calculated the monthly Alpha based on a mean monthly standard deviations, monthly risk free interest rate and beta calculated form the same data.


When the monthly Alpha, the mean monthly standard deviations, and the monthly risk free interest rate are annualzed with the formula above, why does to the annualized Alpha value not Tie out using the same beta?? Your calculation is based on the assumption that the risk free rate was the same for every period which is unlikely to be the case. Given the monthly and yearly calculation does this then mean a daily alpha would be(1+alpha)^250-1? If I have data for 9 years worth of back testing, how do I calculate the average annual alpha?
I want to use this calculator to figure out the Beta and Alpha for a portfolio on an annual basis for 2014.
Suppose that I have 10 yrs of data with monthly returns, in this case which risk free rate should I use because it changes each month? How would you modify the calculation to take into account varying risk free rates over the time period covered?


When you talk about risk free return, short maturity treasuries are really the only securities you can talk about. If the returns specified in Step 1 are monthly returns, then your risk free rate has to be on a monthly basis. The 10 YR UST does not represent credit risk, but being long the 10 YR would have hurt your account NAV during part of last year significantly.



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